Abstract

Some commentators are now advocating a devaluation of the euro, citing that this would help the uncompetitive economies of the South to export more to non-EU countries as well as benefiting the eurozone’s larger economies such as Germany. Bob Hancké assesses the merits of devaluing the currency, but finds that owing to the eurozone’s relatively closed nature as a trade area, the process would likely exacerbate the current north/south current account divergence.